Contemporary Issues in Private Health

Insurance

Ben Ooi 18 May 2015

© Ben Ooi

This presentation has been prepared for the Actuaries Institute 2015

Actuaries Summit.

The Institute Council wishes it to be understood that opinions put forward

herein are not necessarily those of the Institute and the Council is not

responsible for those opinions.

For the next 55 mins….

• 40 minutes brief slide show, with more slides in Appendix.

• 15 minutes discussion.

• This workshop assumes some PHI knowledge.

2

Roadmap Background

Stakeholders

Insurers, products

Policyholders

Products

Financial

Capital

Recent developments

Consumer issues

Affordability

PHI rebate

Downgrades

Complexity

Out of pockets

Value

Insurer issues

Sustainability

Risk equalisation

Financial pressures

Government policy changes

Other Environmental changes

Actuaries

The AA Role

Challenges

Outlook

Longer term

Shorter term

3

Regulators

Background: stakeholders

Policyholders

55% of

Australians or

13 million

people

Providers

34 Private

health insurers

Hospitals (private and public)

Doctors, other

providers

Health

Minister, DoH

PHIAC, APRA

PHIO, CO

ACCC, others Intermediaries

Actuaries

Shareholders

4

Background: insurers

Hospital policies at 30 June 2014. Source: PHIAC

5

Health related business

Health insurance business

Background: products

Hospital

Treatment

General

treatment

Overseas visitors

Overseas students

• Components or package

• Differential pricing by state, scale, packages, etc

• Lifestage products, tax products

• Some have extra cover for GP, health plans, loyalty

• PHIO comparison website (privatehealth.gov.au) lists over 25,000

“products”.

• General treatment products can be Fixed benefits, Percentage

benefits with Limits, sub-limits, etc.

• Lots to choose from!

6

Background: policyholders

11million

people have

hospital cover

(5.4m policies)

2million

people have

general only

cover

(1.0m policies)

Total number of

policies increased

by 2.7% for FY14

(168,000 policies)

but made up of

585,000 new to PHI

offset by lapses and

other movements.

At June 2014

Net increase in

hospital policies

FY14

Net growth

rate% FY14

BUPA 31,647 Health.com.au 95%

Health.com.au 15,085 HIF 16%

HCF 12,779 CUA 13%

NIB 8,901 Navy 10%

Teachers 7,874 DHF 8%

GMHBA 7,684 GMHBA 8%

7

Background: financial

Results vary by

insurers!

Rate increases

2011 2012 2013 2014 2015

Medibank Private5.4% 4.7% 6.2% 6.5% 6.6%

BUPA 5.1% 4.9% 5.8% 6.4% 5.6%

HCF 6.4% 5.9% 5.7% 6.9% 6.6%

NIB 6.2% 5.5% 6.5% 8.0% 6.6%

HBF 5.9% 5.9% 3.8% 3.7% 6.0%

Industry 5.6% 5.1% 5.6% 6.2% 6.2%

$20b premium

industry

More details in

appendix

8

FY11 FY12 FY13 FY14

P&L

Premiums ($b) 15.4 16.7 18.0 19.3

Surplus (after tax) ($b) 1.2 1.0 1.1 1.1

Hospital gross margin 10.5% 10.3% 9.6% 9.3%

General gross margin 25.2% 24.3% 21.9% 21.0%

Gross margin 14.7% 14.3% 13.1% 12.6%

MER 9.1% 9.4% 8.9% 8.6%

Net margin 5.5% 4.9% 4.2% 4.0%

Surplus margin 7.6% 6.2% 6.1% 5.5%

Capital

Health benefits fund assets ($b) 9.5 11.1 10.7 11.1

Prudential capital requirements ($b) 6.1 7.4 7.1 6.0

Assets in excess of prudential requirements ($b) 3.4 3.7 3.6 5.1

Background: capital

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14

Net assets on premium

9

Background: capital requirements Since the last Actuarial Summit:

• New capital standards were introduced

– Capital adequacy from 31 March 2014

– Solvency from 1 July 2014

– Capital management policy from 1 July 2014

• $1.5b reduction in prudential capital requirements

10

Recent developments Plans to cease PHIAC and PHIO Medibank Private listed on ASX Members Own Health Funds launched Primary Health acquired Transport Health (which then converted to open and for-

profit) CUA converted to open for-profit Change in Minister of Health from Peter Dutton to Sussan Ley 30% rebate reduced to 29.04% (April 2014) then to 27.82% (April 2015) MLS thresholds frozen for next 3 years Lots of Commission of Audit recommendations While PHI Participation continues to increase, there is an increasing shift towards

lower cost products Cash rate drops to historic low of 2.0% Changes to Medicare, GP payments? Harper competition review Several health insurers involved in primary health networks (PHNs)

11

Roadmap Background

Stakeholders

Insurers, products

Policyholders

Products

Financial

Capital

Recent developments

Consumer issues

Affordability

PHI rebate

Downgrades

Complexity

Out of pockets

Value

Insurer issues

Sustainability

Risk equalisation

Financial pressures

Government policy changes

Other Environmental changes

Actuaries

The AA Role

Challenges

Outlook

Longer term

Shorter term

12

1. Affordability (purchasing issues)

• Example: top cover package for a family could be about $8000 (ex rebate) at April 2015.

• Premium rate increases have been trending at about 6%. For example, in ten years the same product could be about $14k (ex rebate)?

$-

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

Fund 1 Fund 2 Fund 3 Fund 4

Annual premium rates for top nil excess package products for NSW families - April 2015

13

1. PHI Rebate (and MLS)

15%

18%

21%

24%

27%

30%

Ap

r-1

3

Ap

r-1

4

Ap

r-1

5

Ap

r-1

6

Ap

r-1

7

Ap

r-1

8

Ap

r-1

9

Ap

r-2

0

Ap

r-2

1

Ap

r-2

2

Ap

r-2

3

The future 30% rebate

Actual

if CPI was 2.5% p.a., rate increase 6.5% p.a.

if CPI was 1% p.a., rate increase of 6.5% p.a.

if CPI was 0% p.a. and rate increase of 7%

14

1. PHI Rebate • The rebate is dependent on income band and age band.

• MLS thresholds “paused” for FY15, FY16 and FY17.

• The rebate is indexed to CPI, and will significantly reduce over time. This is about a 1-2% p.a. impact (increase in premiums) to consumers.

• 6% is headline increase for the fund, includes “rate protection”. In practice, the product level increase will vary from the headline. Including the reduction to the rebate (if any), the net increase to the consumer could be more.

15

2. Downgrades

$-

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

Fund 1 Fund 2 Fund 3 Fund 4

Annual premium rates for basic $1000 excess package products for NSW families - April 2015

Top (faded colours) Basic (bold colours)

16

2. Downgrades • Eg non-claimers can change cover from nil to $500 excess to reduce the

impact of the premium rate increase. Or when rebate tiers were introduced, some dropped general treatment cover.

• Many drivers: affordability, product design, consumer demand, legislation change.

• Downgrades can lead to increased dissatisfaction, eg complaints, not meeting expectations.

• An issue for both consumers and insurers.

17

2. Downgrades

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

5,000,000

Total Hospital Treatment - Total Policies and Persons

Excess and Co-payment

No excess and no co-payment

Exclusionary

Non Exclusionary

• The number of policies with either exclusions and/or excesses or co-payments have increased over the past decade.

• At 31 December 2014, only 13% of total hospital policies have no restrictions, excess or exclusions.

18

2. Downgrades • The financial impact of product

downgrades is about 1% of revenue per annum in the past 5 years.

• But how long can downgrades persist given that there are minimum benefit requirements? and when will average spend as a % of income increase?

• What is the impact on the fitness of purposes?

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14

Effect of downgrades in revenue

rate increase avg premium increase

1.20%

1.30%

1.40%

1.50%

1.60%

1.70%

1.80%

1.90%

FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14

Avg premiums as a % of annualised AWE

19

3. Benefits are complex • Hospital treatment

– Hospital fees vs doctors (medical) fees

– Excess, co-pay, max out-of-pockets per year, same day waiver of excess

– In-patient vs out-patient, hospital substitute, CDMP

– Waiting period, benefit limitation period

– Exclusions, restrictions, minimum benefits

– Non-agreement hospitals

• General treatment

– Initial benefit, subsequent consultation

– Sub-limits, group limits, per person limits, per family limits

– Limits per financial year, or rolling 12 months

– Loyalty benefits that increase with membership tenure

• Boils down to “what is my out of pocket?”

20

3. Out of pockets

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

70%

71%

72%

73%

74%

75%

76%

77%

78%

79%

80%

Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14

ou

t o

f p

ock

et a

s a

% o

f to

tal h

osp

ital

co

st (

ex

med

icar

e b

enef

it)

% o

f to

tal h

osp

ital

po

licie

s

Out of pockets vs excess products

% of policies with an excess Out of pocket as a% of cost

But this is not

the whole

story! Eg

excluded

treatments

are not

reported.

21

3. Unexpected....Out of pockets • Out of pockets are often unexpected, hence the frustration.

• The number of complaints (relating to benefits and out of pocket costs) have increased at a rate greater than membership growth in past several years.

• Expectations gap suggests lack of engagement/understanding from the consumer and/or product complexity from the insurer.

• Increasing popularity of lower cost products (which have more out of pockets) are likely to contribute to customer dissatisfaction.

Source: PHIO. Note the different scales on the y axis, but I have scaled them for you! 22

3. Other thoughts.... • The increasing number of intermediaries suggests an increasing demand for

assistance in purchasing PHI due all these complexities.

• I think that a contributing factor for these issues stem from the inappropriate motivation as these issues are less relevant for those who “need” their cover.

• For example, policyholders avoiding Medicare Levy Surcharge and/or Lifetime Health Cover will have different requirements from policyholders who value their cover.

• Grudge purchasers are a large and increasing proportion of total policyholders. It make sense that they are less loyal, more price driven and more vocal.

23

4. Value for money? • Perception of a “free” public system. Australians have an “Option”: Medicare

and a generally good public health system.

• Perception of PHI to cover everything!

• Many members seem to expect or feel entitled to a “return” on their health insurance premium (yet do not expect a return from their car or home insurance).

• Do the current products fit its purpose? (particularly if the purpose or motivation, varies from true insurance to avoiding penalties)

24

Roadmap Background

Stakeholders

Insurers, products

Policyholders

Products

Financial

Capital

Recent developments

Consumer issues

Affordability

PHI rebate

Downgrades

Complexity

Out of pockets

Value

Insurer issues

Sustainability

Risk equalisation

Financial pressures

Government policy changes

Other Environmental changes

Actuaries

The AA Role

Challenges

Outlook

Longer term

Shorter term

25

1. Sustainability • Retaining the value proposition and relevance to consumers. Therefore consumer

issues are insurer issues.

• How to “stay ahead” of competitors?

• Scale

– What is the optimal or minimum size?

– What is the appropriate growth rate?

• Differentiators:

– Some insurers offering broader cover such as GP visits

– Some insurers have health centres

– PHI involvement in PHNs

– Preferred provider networks

26

2. Risk equalisation • Risk equalisation is keystone of community rating.

– In short, it is a subsidy scheme between different risk groups (old and chronic vs young and healthy). Theoretically, premium rates do not differ by risk.

– But has community rating (and therefore risk equalisation) been diluted by product/benefit design?

• The pool has increased at around 8% p.a. over the past decade. Is the risk equalisation system sustainable?

• There are industry calls to review it. Ideas include:

– Review age factors.

– Review high cost claims pool.

– Review the approach, eg risk based capitation.

– Allow some risk rating.

27

2. Risk equalisation Payers Receivers

Transport

HCI Navy

NHBA

QCH

Lysaght HIF

Police

TFH

GUC GMHBA

HPL

CBHS

Defence

HCF

NIB DHF

Mildura

Hguard

ACA

HPartne

rs

CDH RBHS

Westfund

Phoenix

StLukes Latrobe

CUA RT

AU HBF

MPL BUPA

Year to Jun2014 results 28

2. Risk equalisation

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

0

100

200

300

400

500

600

700

800

FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014

Gross deficit per SEU

Gross deficit per SEU Annual increase

29

2. Risk equalisation

Current Scenario

55-59 15.0% 0.0%

60-64 42.5% 20.0%

65-69 60.0% 40.0%

70-74 70.0% 50.0%

75-79 76.0% 60.0%

80-84 78.0% 67.5%

85-89 82.0% 67.5%

90-94 82.0% 67.5%

95+ 82.0% 67.5%

Age factors

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80-84 85-89 90-94 95+

Hospital drawing rate (CY14)

DR (pre RE) DR (post current RE) DR (post scenario RE)

Scenario drawing rate

higher than current due

to lesser benefits

equalised Scenario drawing rate lower than

current due to lesser benefits

equalised lower state average deficit

• This scenario reduces the annual state average deficit by approximately $190 p.a. which

lowers the drawing rate for persons younger than 55. However there is an increase in the

drawing rate of more than $500 p.a. for most persons older than 55, which could translate

into a premium increase for some policyholders to offset the lower state average deficit

being paid.

30

3. Financial pressures • Decreasing margins as discussed earlier. “Margin pressures” consist of:

– Pressure to keep premium rate increases low; and

– Increasing cost pressures

• Health spending is 9.5% of GDP (AIHW excl residential aged care)

DRIVEN BY SIGNIFICANT INCREASE IN HEALTH AWARENESS, EDUCATION AND DEMAND/EXPECTATIONS

Health insurance cost pressures Health cost pressures

•Benefits for medical services •Wages increases

•Growth in utilisation (volume) •Technology advances

•Expansion in no-gap benefits •Prostheses and other devices

•Growth in use of contracts •Pharmaceuticals

•Private hospital contracting •Medical procedures and treatment techniques

•Table drift (more products leading to anti-selection)

•Ageing population

31

3. Financial pressures - inflation

• But this is influenced by product downgrades and trend of new sales drawn towards low cost products.

• Product drawing rates not publicly available, but is generally higher at around 8-9% p.a. 32

-3.0%

-1.0%

1.0%

3.0%

5.0%

7.0%

9.0%

Dec

-05

Dec

-06

Dec

-07

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

Year to

Hospital inflation (% p.a.)

Benefit improvements Provider cost increase Volume increases total inflation

3. Financial pressures - inflation

33

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%D

ec-0

5

Dec

-06

Dec

-07

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

Year to

General treatment inflation (% p.a.)

Benefit improvements Provider cost increase Volume increases total inflation

3. Side note: CPI vs rate increase On a side note.....

• Many like to compare rate increases to CPI. This is a flawed comparison.

• CPI is the increase in the price of a particular basket of goods, regardless of volume.

• Premium rate increases reflects the increase in the cost of claims AND the volume of claims.

• Simple example could be CPI indicates increase the price of a meal, however private health insurance is like a buffet and the premium is the cost of the buffet. If diners eat more, the cost of the buffet reflects the cost AND the volume of meals.

34

3. Financial pressures - continued • For profit: return on equity for shareholders, share price and ASX expectations

• Not-for-profit: value for members, customer satisfaction, affordability

• Balancing strategic KPIs, capital management policy, market competitiveness

35

4. Government policy changes • Reduction of rebate (as mentioned above)

• Change from PHIAC to APRA

– risk management standard (future?)

– capital standards (future?)

– changes to PHI Act, etc

Potential changes:

• Commission of audit findings

• Harper competition review and potential deregulation

• Tax paper

36

4. Other environmental changes – cont’d • Changing market

– Medibank Private IPO

– Health.com.au

– Primary Health (Transport Health)

– Members Own funds

• Financial markets

– Issues with term deposits

• PHI involvement in Primary Health Networks (PHN)

37

The actuarial role • Appointed Actuary role

– AA role was introduced in 2004. Over 10 years!

– Responsible for financial condition report, and duties including liability valuation, risk margins and capital adequacy stress test

– Notifiable circumstances, including pricing, product changes, investments, etc with a catch all clause: “any other event that the insurer reasonably expects to have a significant impact on the conduct of the business of a health benefits fund of the insurer”

• Actuaries Institute HPC activities focus a lot on PHI.

38

The actuarial role (con’d) • My view on challenges for actuaries in PHI are similar to other practice areas:

– Ensuring value

– Balancing 1st line vs 2nd line: being strategic vs being compliant with the defined AA role

– CPS 220 and CROs

– For health insurers : sustainability and affordability of PHI, and therefore longevity of the PHI industry.

• Do we have the appropriate number of actuaries in PHI?

• What are your thoughts? (save for the discussion time)

39

In summary.... Key themes for consumer and insurer issues could be grouped into:

Affordability

Sustainability Fitness for purpose

40

Outlook (longer term).... • Should we re-visit community rating (and therefore re-open the discussion on

risk rating vs community rating, risk equalisation: what to equalise, how to equalise, how to address products that challenge community rating)?

• Rather than ask whether the market is competitive, should we ask if consumers are engaged with the product? How do we get better engagement?

• How should PHI fit in with the larger and wider health system? Should insurers be focus on funding only? Should and can insurers play a bigger role in health?

41

Outlook (shorter term).... On the short term radar (from an actuary’s perspective):

APRA transition – 1 July

How is the pricing round going to work under APRA for April 2016?

Risk Management Standard

Pricing deregulation – what and when? (not if....)

PHNs

Actuaries can contribute to these discussions!

42

Questions/discussion

43

Appendix

44

Appendix: policies

Source: PHIAC 45

Appendix: policies

Source: PHIAC 46

Appendix: Policies growth

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14

Year to

Policy growth (% p.a.)

Total Hospital Treatment Hospital Treatment & General Treatment Combined

General Treatment Ambulance Only Total General Treatment Only

Total General Treatment Total PoliciesSource: PHIAC

47

Appendix: Persons growth

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

Dec-10 Dec-11 Dec-12 Dec-13 Dec-14

Year to

Growth in hospital persons - % p.a.

NSW & ACT VIC QLD SA WA TAS ACT NT AUST

Source: PHIAC 48

Appendix: PHI participation

Source: PHIAC 0%

10%

20%

30%

40%

50%

60%

70%

0-4 5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80-84 85-89 90-94 95+

PHI Participation by age

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014Even though there has been more 20-30 years insured,

PHI participation is still relatively low in this age segment.

49

Appendix: rate increases

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Rate increase (FCI)

Source: DoH

50

Appendix: rate increase

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Industry rate increases

51

Source: DoH

Appendix: rate increase

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

MP

L

BU

PA

HC

F

NIB

HB

F

AU

HL

TFH

GM

HB

A

Defe

nce

CB

HS

HIF

West

fun

d

Latr

ob

e

HP

L

H'P

art

ners

CU

A

H'g

uard

Lysa

gh

t

QTU

H

GU

C

St

Luke's

QC

H

Mild

ura

NH

BA

HC

I

Tra

nsp

ort

CD

H RT

Po

lice

Navy

DH

F

Ph

oen

ix

AC

A

RB

HS

>5% market share 1-5% market share 0.5%-1% market share <0.5% market share, open <0.5% market share, restricted

April 2015 rate increases - Industry

Rate increase (solid=Not for profit, hash=For profit) Weighted average Industry average

52

Source: DoH

Appendix: rate increase

HCF

HBF

TFH

GMHBA

Defence

CBHS

Westfund

HIF

Latrobe

H'Partners

CUA

H'guard

Lysaght

QTUHSt Luke's

RT

Police

QCH

Navy

Mildura

Phoenix

ACA

HCI

CDH

RBHS

MPL

BUPA

NIB

AUHL

GUC

DHF

NHBA

Transport

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

-5.0% 0.0% 5.0% 10.0% 15.0% 20.0%

Rat

e in

crea

se -

apri

l 20

15

FY14 Policy Growth

Rate increase - april 2015 vs FY14 Policy Growth

Not for profit For Profit 53

Source: DoH,

PHIAC

Appendix: ageing

37.0

37.5

38.0

38.5

39.0

39.5

40.0

40.5

41.0Average Age of Persons with Hospital Treatment - AUS

54 Source: PHIAC

Appendix: risk profile

0.96

0.98

1.00

1.02

1.04

1.06

1.08

1.10

Risk weights

Before RETF After RETF

55 Source: based on PHIAC data

Appendix: benefits (drawing rates)

0

1,000

2,000

3,000

4,000

5,000

6,000

0–4

5–9

10–1

4

15–1

9

20–2

4

25–2

9

30–3

4

35–3

9

40–4

4

45–4

9

50–5

4

55–5

9

60–6

4

65–6

9

70–7

4

75–7

9

80–8

4

85–8

9

90–9

4

95

+

Hospital drawing rate ($ per person) by age

Jun-13 Jun-14

56

Source: PHIAC

Appendix: RETF

0

1,000,000,000

2,000,000,000

3,000,000,000

4,000,000,000

5,000,000,000

6,000,000,000

FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014

Risk equalisation trust fund

57

Source: PHIAC

Appendix: gross margin

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14

Industry gross margin

58

Source: PHIAC

Appendix: expenses

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14

Industry MER

59 Source: PHIAC

Appendix: net margin

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14

Industry Net Margin (% of premiums)

Gross margin MER Net margin

60

Source: PHIAC

Appendix: net margin vs rate increase

HCF

HBF

TFH

GMHBA

Defence

CBHS

Westfund

HIF

Latrobe

H'Partners

CUA

H'guard

Lysaght

QTUHSt Luke's

RT

Police

QCH

Navy

Mildura

Phoenix

ACA

HCI

CDH

RBHS

MPL

BUPA

NIB

AUHL

HPL

GUC

DHF

NHBA

Transport

3.5%

4.5%

5.5%

6.5%

7.5%

8.5%

-5.0% -4.0% -3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% 11.0% 12.0% 13.0% 14.0% 15.0% 16.0%

Rate

in

crease

-ap

ril 2015

FY14 Net margin

Rate increase - april 2015 vs FY14 Net margin

61

Source: PHIAC

Appendix: pre-tax surplus

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14

Industry Surplus margin (% of premiums, before tax)

Net margin Investment margin

62

Source: PHIAC